The ongoing instability in the Russian retail sector has led to Eastern Europe shopping centre owner and developer Atrium European Real Estate reporting lower profits and half-year earnings.
Commenting in an “ad hoc announcement” on both its second quarter and 2015 first-half trading figures Atrium group chief executive, Josip Kardun, insisted the outlook for most of his company’s investment countries and core markets, remains “robust” and optimistic.
“However in Russia,” he cautioned, “the situation remains fundamentally challenging and it is still too early to predict any notable, positive momentum.”
Rental income for the Jersey-headquartered company dropped slightly from €106.9m (£75.8m) for the first six months of 2014 to €103.6m (£73.5m) this year. “This performance was impacted by the rental discounts provided to tenants in the group’s Russian portfolio, granted to protect occupancy levels, as the economic situation remained challenging,” the statement explained.
Half yearly profits after taxation subsequently fell by more than two thirds to €10m (£7m) — compared to €36.2m (£25.7m) for first six months of 2014. Atrium blames the drop mainly on the cost of asset disposal and a €20.9m (£14.8m) increase in finance expenses.
Operating margins within Atrium’s core markets of Poland, Czech Republic and Slovakia remained strong at 98 per cent, with the group reporting an operating margin of 94.5 per cent, despite the adverse performance in Russia. Occupancy rates at the end of June, 2015, were slightly higher at 96.8 per cent.
Atrium, in conjunction with its subsidiaries, owns, manages and develops commercial real estate properties in the retail sector. Its property portfolio includes hypermarket- and supermarket-anchored malls, local convenience stores and shopping centers across most of Eastern Europe.
The group’s €2.7bn (£1.97bn) investment portfolio — including the Atrium Felicity shopping centre in Lublin, Poland, which it opened last year — now stands at 82 assets, down from 153 holdings at the end of 2014. Although the value grew by 7.4 per cent, the shrinkage was largely due to the disposal of 72 non-core properties in the Czech Republic.
Two of this year’s biggest additions to the firm’s stock were the €162m (£114m) June acquisition of a 75 per cent stake in the Arkády Pankrác shopping centre in Prague and the March opening of the 186,215 sq ft extension at its Atrium Copernicus shopping complex in Torun, Poland.
“During the first half of 2015, there has been an on-going focus on operational and financial improvements as we continued with the implementation of our well defined strategy to grow the group’s portfolio and income, while reweighting the asset base towards higher quality cash flow from larger scale and dominant shopping centres in our core markets,” Kardun said.
“Looking ahead, Atrium expects to benefit from the good prospects for consumer spending and the persistently healthy appetite shown by retailers and investors alike for its core markets, especially as the group’s asset management initiatives and portfolio rotation start to bear fruit, and the forthcoming expiries of long lease durations allow for stronger rental growth in the medium to long term.”
Formerly known as Meinl European Land Limited, the closed-end investment company changed its name to Atrium European Real Estate Limited in August, 2008.